It is the time of the year when licensing authorities are setting their fees for the next financial year. 

It is important that taxi and private hire licence holders understand the law relating to fee setting to understand how when licensing authorities should arrive at their fees and how this can be challenged. 

In this article, I will consider what the legislation allows licensing authorities to take into account when setting fees, some of the most significant and well established “redlines” and briefly look at the ways the trade can challenge licensing fees.

Legislation

Fees for drivers licences

s.53 of the Local Government (Miscellaneous Provisions) Act 1976: 

“…a district council may demand and recover for the grant to any person of a licence to drive a hackney carriage, or a private hire vehicle, as the case may be, such a fee as they consider reasonable with a view to recovering the costs of issue and administration and may remit the whole or part of the fee in respect of a private hire vehicle in any case in which they think it appropriate to do so.” 

Section 53 above therefore limits the cost of a driver’s licence to the council’s administration costs associated with the “…the grant to any person of a licence to drive a hackney carriage, or a private hire vehicle…”.

Fees for vehicle and operators’ licences

s.70 of the Local Government (Miscellaneous Provisions) Act 1976: 

“…a district council may charge such fees for the grant of vehicle and operators’ licences as may be resolved by them from time to time and as may be sufficient in the aggregate to cover in whole or in part: 

(a) the reasonable cost of the carrying out by or on behalf of the district council of inspections of hackney carriages and private hire vehicles for the purpose of determining whether any such licence should be granted or renewed;

(b) the reasonable cost of providing hackney carriage stands; and

(c) any reasonable administrative or other costs in connection with the foregoing and with the control and supervision of hackney carriages and private hire vehicles.” 

The licensing costs recoverable by a district authority in respect of vehicles and operators is limited to vehicle inspection costs for the specific purpose of determining their suitability to be licensed, reasonable cost of providing hackney carriage stands, reasonable administration costs for processing the licence application and finally reasonable costs associated with “…control and supervision of hackney carriages and private hire vehicles.” 

It is clear from section 53, that a licensing authority cannot include driver enforcement and supervision costs against driver licence fees. Saffam J in the Wakefield case therefore concluded that, to this extent, licensing regimes cannot be fully self-funding.Adopting

The 1967 Act prescribes the procedure that a district council must follow when setting fees for vehicle and operators’ licences. 

s.70(3)-(5) states that if a district council sets fees in excess of those prescribed in subsection 2 (which all licensing authorities do), it must consult by placing a notice in a local newspaper circulating in the district and allowing for a consultation period of no less than twenty-eight days. If any person makes an objection to the proposed fees, a further date (not later than two months after the first specified date) must be set to allow the council to consider the objection and to vary the fees if applicable. 

The fee adoption and variation process is important for the trade to be aware of because, if a district council does not comply with the advertising and consultation requirements, the fees set by it would be unlawful and open to challenge and claims for restitution.

Redlines

Over the years there has been substantial litigation on the subject of licensing fees and particularly in connection with taxi and private hire licensing fees. From this have arisen a number of general common law principles that are now established and embedded as non-negotiable fee setting principles.

 

Abdul Rehman v Wakefield District Council

In a very important ruling on taxi fees, the Court of Appeal handed down its ruling in the ongoing Wakefield District Council case.  Whilst there is not the capacity to consider the case in any great detail in this article, it is important to draw a number of important points that is relevant to this article. 

  1. The Court of Appeal confirmed that each licence type is a separate legal entity and fees should be calculated accordingly.
  2. 53 (above) cannot be used to recover the costs of enforcement against drivers.
  3. 70 however can be interpreted to include the cost of enforcement against drivers.
  4. The Court of Appeal confirmed that there is no legal principle that licensing should be cost neutral.

More about the case here: https://www.bailii.org/ew/cases/EWCA/Civ/2019/2166.html

Cannot be used for revenue generation

There is an established an important principle that taxi and private hire licensing fees cannot be used as a general source of raise revenue for a district council. A series of court cases, starting with Manchester City Council [R] v King [QBD] 1991, has established the principle that a district council must, when setting fees, consider any previous surplus and, if they so chose, deficit and adjust the level of fees accordingly. 

For example, when a district authority’s accounts showed a surplus in taxi and/or private hire fee income, that surplus must be factored in. Where accounts show a deficit, this too can be factored in but, unlike a surplus, a deficit can be ignored. 

It is worth noting however that in licensing authority accounting timescales, adjusting fees according to surplus/deficit will happen on a three yearly cycle because taxi and private hire licensing fees setting happens before the financial year end.

No cross subsidies

Cross subsidisation is the practice of charging higher fees to one group (i.e. driver’s licences) to subsidise lower prices for another group (i.e. vehicles licences).  The Court of Appeal ruling in the Wakefield case went further to say that driver, vehicle and operator licensing are separate regimes and the costs of these should be calculated entirely separate from each other to avoid cross subsidisation. 

Master of the Rolls, King LJ and Lavender J said at paragraphs 39 and 40: 

“What is apparent from those provisions of Part II, read where appropriate with the 1847 Act, is that each of the three types of licence – vehicle, operator and driver – has a comprehensive and self-contained statutory regime, which addresses grant, terms, suspension, revocation and fee. There is no cross-referencing in relation to any of those matters. The notion that the fee for one type of licence can reflect the costs involved in another, far from being implicit in Part II of the 1976 Act, is entirely contrary to its structure. 

“What is also apparent, on the other hand, is the similarity in the statutory treatment of some aspects of the three different types of licence. In particular the qualifying requirements for the grant of each licence involve matters which will be relevant throughout the duration of the licence, whether they be as to design, appearance, mechanical condition, safety, comfort and the existence of a valid policy of insurance in the case of a vehicle licence, or as to the person being a fit and proper person and not disqualified by reason of immigration status in the case of a driver’s licence and an operator’s licence. The continuing relevance of at least some of those matters throughout the duration of each type of licence is also reflected in the provisions for suspension and revocation. The fact that, in the case of each type of licence, the district council can attach such conditions as they consider reasonably necessary indicates that Parliament envisaged that there would be additional requirements to be observed as conditions of the licence after its grant. Plainly, in all those cases the district council would need to monitor compliance with the various requirements and conditions on the basis of which the licence was granted and was to be permitted to subsist until it came to an end or was suspended or revoked. That would inevitably involve, in the case of each category of licence, expense on the part of the district council beyond the cost of the original grant of the licence.” 

As I previously explained in this article, a general legal principle is that licensing authorities have no powers beyond those which statute has given them. Therefore in respect of setting and adopting hackney carriage and private hire licensing fees, licensing authorities are bound by the specific heads of recovery as prescribed in legislation as confirmed in the Wakefield case.

Challenge

As with any decision made by a licensing authority, it is subject to legal challenge. As I have previously mentioned in this article, there has been a substantial amount of litigation around fees and charges for taxi and private hire licensing. Whilst a judicial review may seem the most obvious means of challenge, a complaint to the local auditor can be as effective without the substantial costs attached to judicial review proceedings.

Judicial Review

A decision to set fees in respect of taxi and private hire licensing taken by a district council is challengeable in the High Court by way of judicial review. There are specific rules that must be followed when seeking a judicial review of such a decision. 

The Civil Procedure Rules states that judicial review proceedings must be filed promptly but in any event not later than 3 months after the grounds to make the claim first arose. There are therefore strict timescales in place. 

Furthermore, there are specific grounds for seeking a judicial review (briefly stated as): 

  1. Illegality – failure to follow the law properly
  2. Irrationality – demonstrably unreasonable as to constitute ‘irrationality’
  3. Procedural impropriety/unfairness – act so unfairly that it amounts to an abuse of power

The High Court can, in finding the action of a district council to be unlawful:

  1. Quash the decision and requiring the council to re-take the decision;
  2. Making a declaration; and/or
  3. Award damages.

Local Auditor

An alternative means of challenging fees set by a district authority is through a complaint to the Local Auditor (previously District Auditor).

Local Auditors are people officially appointed to carry out the audit of local government and health bodies’ financial arrangements and this will also therefore include licensing fees as these form part of a district council’s accounts.

Generally speaking, there is a period of 30 days after the setting of fees where licence holders can inspect and object to the fees set. The objection should relate to legally relevant matters such as not complying with legislative requirements, incorrect charging and calculations etc. If the district authority’s response is unsatisfactory, a complaint to the appointed local auditor can be made in writing indicating which item(s) in the accounts are being objected to and why they are unlawful. 

Local auditors have a range of statutory powers attributed to them including the ability to apply to the High Court for a statutory declaration that an item, or items, of account is against the law. In such circumstances, the local auditor can require the district council to act to rectify and remedy the error.

Stephen McCaffrey

Regulatory defence barrister specialising in taxi and private hire licensing law, appeals and defence.

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